Sensex and Nifty Face Challenges in Early Trading

Sensex and Nifty Face Challenges in Early Trading
Sensex and Nifty Face Challenges in Early Trading
Sensex and Nifty Face Challenges in Early Trading
Sensex and Nifty Face Challenges in Early Trading

Sensex and Nifty Face Challenges in Early Trading

Sensex and Nifty Face Challenges in Early Trading: Bank, Finance, and Pharma Stocks Drop While PSU Bank Stocks Rise

Sensex and Nifty Face Challenges in Early Trading: Bank, Finance, and Pharma Stocks Drop While PSU Bank Stocks Rise

In the early hours of trading, both the Sensex and Nifty are grappling with a mixed performance in various sectors. Bank, finance, and pharmaceutical stocks are facing declines, while stocks from the public sector banks (PSU Bank) are showing positive gains.

Key Events to Watch This Week:

This week is marked by several significant events that will play a crucial role in shaping the market’s direction. These events include the release of Q2FY24 (July-September quarter of fiscal 2023-24) results, the disclosure of macroeconomic data, the inflow of foreign funds, and movements in crude oil prices.

The markets are also anticipated to react to the concerns that the ongoing Israel-Hamas tension could potentially spill into the realm of global crude oil politics. There are apprehensions that these geopolitical tensions may lead to disruptions in the flow of petroleum, impacting global oil prices.

Notable Movement in the Oil Market:

Over the weekend, the oil market experienced robust activity, with the benchmark U.S. crude oil surging by $4.78, settling at $87.69 per barrel.

Insights on HDFC Life Insurance: In-line Quarter Results

Akshay Jain of JM Financial Institution has shared insights on HDFC Life Insurance’s 2Q24 results. The results for the quarter are considered in-line with expectations. During 2QFY24, HDFC Life reported an Annualized Premium Equivalent (APE) of INR 30.5 billion, indicating a YoY growth of +1% and a QoQ growth of +31%. The company maintained a market share of 9.7%, reflecting a YoY increase of 70 basis points.

While the non-par savings segment continued to exhibit a decline (-35% YoY) due to new tax rules, strong growth in ULIPs and the par segment balanced out the negative impact. The Banca channel remained the dominant distribution channel, contributing 65% of individual APE in 1HFY24, which marks an 8 percentage point YoY increase. The company’s wallet share in HDFC Bank rose from 55.5% in 1QFY24 to 62% in 2QFY24.

HDFC Life reported Value of New Business (VNB) margins of 26.3%, with a QoQ increase of 10 basis points, despite changes in the mix of high-margin non-par savings and strong growth in the low-margin ULIP segment. The company expects future VNB growth to be driven by APE growth rather than margin improvement.

As of September 2023, HDFC Life reported an Embedded Value (EV) of INR 429 billion, with operating Return on Embedded Value (RoEV) improving to 16.4%. The management remains confident about maintaining incremental growth in the range of 15-16% going forward.

The positive outlook for HDFC Life is attributed to factors such as the successful leveraging of HDFC Bank’s banca channel post-merger, the revival of premium growth, and steady New Business Margins (NBMs), driven by a strong focus on protection.

The valuation for HDFC Life is based on 2.9 times the FY25E EV, leading to a target price of INR 750. The recommendation is to maintain a BUY position.

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